New York Court Dismisses Amazon Challenge of State’s Internet Sales Tax Provision

13 01 2009

Reprinted with permission from Bookselling This Week. This affects me directly as an online retailer and as an independent bookseller.

New York Court Dismisses Amazon Challenge of State’s Internet Sales Tax Provision

In a significant victory for New York’s independent retailers, a New York State judge dismissed a lawsuit filed by Amazon.com that challenged the state’s Internet Sales Tax provision. The provision, which went into law on June 1, 2008, requires online retailers with certain selling activities in the state, such as Amazon.com, to collect and remit sales tax on sales made in New York State. A similar lawsuit by Overstock was also dismissed, according to Reuters.

In dismissing Amazon’s challenge, Judge Eileen Bransten wrote: “The neutral statute simply obligates out-of-state sellers to shoulder their fair share of the tax-collection burden when using New Yorkers to earn profit from other New Yorkers,” as reported by CNN Money. Bransten also noted that Amazon.com had failed to state a claim and that “there is no basis upon which Amazon can prevail,” according to CNN Money.

“It’s extremely gratifying that the New York State Supreme Court’s decision in this case so categorically affirms the responsibility of all retailers to obey existing sales tax law and to collect the required sales tax on Internet sales,” said ABA COO Oren Teicher. “We strongly encourage the taxing authorities in other states throughout the U.S. to follow New York’s lead on this issue and to take the necessary steps to ensure that all retailers comply with the law.”

“We are delighted with the judge’s decision,” said Eileen Dengler, executive director of the New Atlantic Independent Booksellers Association (NAIBA). “Booksellers and their trade associations worked very hard on this issue, and we hope that states will look to this ruling and know that e-fairness can be achieved.”

In early April 2008, the New York State Legislature passed a final budget that included the Internet Sales Tax provision. The provision applies to non-New York State retailers that have $10,000 or more per year in affiliate sales, assuming they do not have nexus in the state through other means (e.g., a warehouse or office).

However, just weeks after the budget was approved, Amazon.com, LLC, and Amazon Services, LLC, filed a complaint in the Supreme Court of the State of New York challenging the Internet Sales Tax provision in the state’s budget. Amazon claimed that the provision was “unconstitutional” because the statute “requires out-of-state Internet retailers, with no physical presence in New York, to collect sales and use taxes,” as reported at the time by Wired.

The legislative victory in New York was the culmination of months of intense lobbying by New York’s independent booksellers and the American Booksellers Association — a campaign that included letters, e-mails, phone calls, and personal visits to legislators in Albany, the state capital. ABA’s efforts included coordinating lobbying activities with other associations representing independent retailers in New York and working closely with NAIBA and the Retail Council of New York, which played a crucial role in face-to-face discussions with key elected officials in Albany.

Other independent trade groups participating in the campaign for e-fairness included the American Specialty Toy Retailing Association, the Coalition of Independent Music Stores, the Independent Florist Association, the National Association of College Stores, the North American Retailer Dealers Association, and the National Bicycle Dealers Association.

I’m interested in your thoughts.

—pmc2

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